Op-ed: How States Can Maximize Clean Energy Jobs

Date: 31 Jan 2011 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

Over 30 U.S. states mandate renewable energy and are willing to pay higher prices for clean electricity.  But most states lack a jobs and economic development strategy for renewable energy, and must watch helplessly as manufacturers like Evergreen Solar move production to China.  Instead, state legislators should emulate the Canadian province of Ontario by passing a comprehensive policy to capture the jobs and economic value of their clean energy transformation. 

Ontario’s bold clean energy program – in just over a year – has resulted in the promise of 43,000 clean energy jobs in support of 5,000 MW of clean energy projects.  The centerpiece of the program is a simple, long term contract for renewable energy developers with a price sufficient to attract investment.  To qualify for a contract, developers must get 60 percent of their project’s value from inside the province.  The rule effectively means that no solar or wind project built in Ontario can obtain a contract without having some components manufactured locally.

This domestic content or “buy local” rule has spurred a fast-growing renewable energy industry in the province, with over 20 new manufacturing plants scheduled to open in the next two years.  The new plants will manufacture solar modules, inverters, racking systems, and wind turbine blades and create thousands of jobs.  The spillover effects from the new manufacturing facilities will multiply the job impacts across the province.

In contrast, the third largest solar manufacturer in the U.S., Evergreen Solar, is shifting its production to China, laying off 800 workers and closing its Massachusetts-based manufacturing plant.  This announcement is on the heels of two other solar plant closures in New York and Silicon Valley. 

The bleeding of jobs won’t stop unless state lawmakers enact new rules to make renewable energy easier to develop and manufacturing harder to outsource. 

While Ontario provides an all-in-one contract for its wind and solar producers, developers in the United States must cobble together a hodgepodge of federal, state, and utility incentives to access financing.  And while Ontario also provides a guaranteed grid connection and long-term contract for qualified projects, U.S. developers typically negotiate their interconnection and power purchase agreements with the utility individually. 

Additionally, no U.S. state has married economic development and renewable energy policy as has Ontario.  The most desirable, long-term jobs in renewable energy are in manufacturing and states do provide manufacturing job subsidies, such as the $44 million provided to Evergreen Solar’s Massachusetts facility.  But these payments are separate from the state’s renewable energy program, with no guarantee of sufficient local demand to maintain the plant. 

Only two states – Washington and Michigan – provide financial incentives for renewable energy that also encourage in-state manufacturing.  In both cases, the incentive programs are too small to have much impact. 

In contrast, Ontario’s clean energy program is built around a strong commitment to local manufacturing and it has attracted as many as 43,000 new jobs at a reasonable cost per job, according to the Institute for Local Self-Reliance.  We estimate that Ontario pays $143,000 per job created, a cost comparable to job subsidy programs in the United States and less than some recent U.S. state clean energy job creation efforts.  And unlike U.S.-based job subsidy programs, the price of Ontario’s new jobs includes thousands of megawatts of clean electricity.

Conveniently, employing the Ontario strategy in the U.S. would almost certainly cost less because of stronger renewable energy resources and higher electricity prices.  For example, Colorado’s solar resource alone would allow it to provide solar developers a similar return on investment at a 33% lower price for power and its higher retail electricity price would further reduce the marginal costs of the program and the resulting jobs compared to Ontario.

Ontario’s strategy is not without controversy, and the buy local rule has drawn a World Trade Organization complaint filed by Japan and the United States.  However, other countries have found ways to favor local manufacturing and production without the trade dispute, including Turkey, whose policy offers higher incentive payments for locally-produced projects, rather than requiring domestic content.  Such a policy would likely also pass interstate commerce muster in the United States. 

U.S. states forgo jobs and economic development because their clean energy policies lack sufficient coordination.  The Canadian province of Ontario has demonstrated the power of comprehensive clean energy policy, and their lesson should be replicated by American legislators.

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Distributed Wind Power Scales, Too

Date: 28 Jan 2011 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

Last week we noted how distributed (solar PV) generation scales, highlighting the 3,000 megawatts of solar PV that Germany installed in 2009, over 80% on rooftops

Distributed wind power scales, as well. 

Of Germany’s 27,000 megawatts of wind power projects (3rd most in the world and most per capita), nearly 90% are smaller than 20 megawatts, with most between 1 and 5 megawatts.

The small projects are also a significant portion of total capacity, with 20 MW and under wind projects contributing half of total wind power capacity.

Data source

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More Than a ‘Flip’ – Community Wind Projects Still Require Financing Acrobatics

Date: 26 Jan 2011 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

Community wind projects deliver larger economic returns and encounter less local resistance, but a new report released last week shows that developing community wind still requires a daunting effort. The report, by Lawrence Berkeley Labs wind guru Mark Bolinger, illustrates the new heights of financial acrobatics required to finance community wind projects.  The history of community … Read More

FHA PowerSaver Loans – a PACE Replacement?

Date: 26 Jan 2011 | posted in: Energy, Energy Self Reliant States | 1 Facebooktwitterredditmail

Late last year, the Federal Housing Administration announced a new PowerSaver loan program to provide financing for home energy efficiency improvements.  The program comes on the heels of the downfall of residential Property Assessed Clean Energy (PACE) financing, which allowed homeowners to pay back energy efficiency improvements via long-term property tax payments, as well as to pass the payments on to the next homeowner.  Can PowerSaver adequately replace PACE?

Sadly, no.

First, a bit of background on PowerSaver.  The loan program is part of FHA’s Title I Property Improvement Program and the basic principle is that the FHA provides loan insurance for participating private lenders who loan to eligible homeowners.  Federal insurance provides 90% coverage for the loan, with the lender only accountable for the remaining 10%, with limits on the portion of a lender’s portfolio in the Title I program.  Participating homeowners pay a premium equal to 1% of the loan amount multiplied by the loan term.  For example, a $10,000 loan financed over 15 years would have an annual premium of $1,500.  

Loans are capped at $25,000 with 15 year terms for energy efficiency and 20 year terms for renewable energy investments.  A list of eligible improvements can be found here. Borrower’s can only be owners of single-family, detached homes with a 660 credit score and a maximum 45% debt-to-income ratio.  Loans under $7,500 can be unsecured, but larger loan amounts must be secured by the first mortgage.  

The following table illustrates the major differences between PACE and PowerSaver:

  PowerSaver PACE
Lien type Secondary Primary
Backstop Federal insurance Local government
Credit score > 660 n/a
Transferable No Yes

In most cases, the differences make the PowerSaver loan significantly less attractive than PACE financing.  A PACE lien came before the mortgage, potentially allowing PACE programs to sell their obligations on the market and allowing local governments to obtain low interest rates.  PACE liens did not require credit scores, allowing many Americans with damaged credit (but good property tax payment history) to make their home more energy efficiency and cost effective.  Finally, the lien could be transferred between property owners, removing the discontinuity between the lifespan of effective energy efficiency improvements (15 years) and the average stay in one home (5 years).  

Perhaps most powerfully, PACE allowed cities and counties to become a hub of energy planning for their communities, whereas PowerSaver simply backstops the private lending market.

FHA should be applauded for expanding the financing options available to homeowners for energy efficiency and renewable energy improvements, but their offering will not provide the same power as PACE. 

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Energy Doldrums

Date: 9 Nov 2003 | posted in: From the Desk of David Morris, The Public Good | 0 Facebooktwitterredditmail

Energy Doldrums by David Morris Originally published in the Minneapolis Star Tribune, November 9, 2003 We’re coming up on the 10th anniversary of a Minnesota legislative session described by two veteran political reporters in this newspaper at the time as “one of the most divisive and emotionally draining in memory.” The key issue was the expansion … Read More

Second Thoughts On A Hydrogen Economy

Date: 24 Feb 2003 | posted in: From the Desk of David Morris, The Public Good | 0 Facebooktwitterredditmail

Second Thoughts on a Hydrogen Economy By David Morris Originally Published on Alternet, February 24, 2003 When George Bush proposed a $1.7 billion program to promote hydrogen-fueled cars in the State of the Union Address, both sides of the aisle applauded. Almost everyone supports a hydrogen economy – conservatives and liberals, tree huggers and oil drillers. … Read More

Bonding With the Next Generation

Sometimes doing the right thing is almost too simple. Requiring publicly funded construction projects to produce no net increase in greenhouse gas emissions is one example: it’s hard to find the down side. By David Morris… Read More

Use Construction Bonds to Fight Global Warming

Date: 26 Mar 2000 | posted in: From the Desk of David Morris, The Public Good | 0 Facebooktwitterredditmail

Use Construction Bonds to Fight Global Warming By David Morris March 26, 2000 What can Minnesotans do to curtail global warming? The problem seems immense, but the solution is straightforward: Use energy more efficiently and shift to renewable fuels. An effective and easy first step toward redressing our share of global pollution would be to adopt … Read More

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